This afternoon was the traditional start of earnings season as Alcoa (AA – 9.10) released earnings after the close today. Apparently the market found the new initially good as shares were up over 1% in aftermarket trading. AA has gotten the moniker as the opener of earnings season due to the company being the first DJIA stock to report each quarter. However, as AA is the leading producer of aluminum which goes into a wide variety of product, this earnings report is often a good indicator as to the health of the overall economy.
There are actually a couple of lessons here as well. First, AA matched earnings, but shares moved up. One reason is that AA beat on their revenue result. Depending on the company and industry, analysts often pay more attention to the revenue result as companies will have less control over sales than earnings. Also, apparently AA forecast higher earnings going forward, the forecast that goes along with an earnings announcement is often more important than the previous quarter result. Stocks are bought for what they are going to do, not what they did, and the forecast is an indication of what the company will do.